A Tale of Regulation in the European Union and Japan: Does Characterizing the Business of Stored-Value Cards as a Financial Activity Impact its Development?

Jean J. Luyat
18 Pac. Rim L. & Pol'y J. 525

The use of stored-value cards is growing rapidly in urban areas in Japan and gaining acceptance as a major means of payment. While institutional and cultural factors as well as business strategies go far in explaining the rapid growth of stored-value cards in Japan, regulation has also played an important role in enabling their use. In Japan, the regulation of stored-value cards has been mostly left to the Prepaid Card Law, which provides a comparatively simple regulatory framework with flexible capital requirements.
The European Union ("EU") and France provide a compelling counter-example to Japan; the EU has pursued a different regulatory course and demand for stored-value cards has remained low there. Pressed by monetary concerns, the EU has directed its member countries to regulate electronic money according to its E-Money Directive. Following this Directive, France implemented a complex three-tiered regulatory framework with high capital requirements. European regulators are now questioning the Directive, which appears to have stifled the growth of stored-value cards. With Japan steaming ahead with stored-value cards, regulators worldwide may want to look to Japan for guidance.